United States District Court, D. Arizona
JAMES A. TEILBORG, Senior District Judge.
Pending before the Court is Defendant United States of America's (the "United States") Motion to Dismiss (Doc. 13). The Court now rules on this Motion.
I. MOTION TO DISMISS
The United States moves to dismiss Mr. Greene's complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(1).
Mr. Greene and his former wife ("the Greenes") filed a joint 1990 tax return on or about March of 1991. (Doc. 1 at 2). The joint return was a 1040 tax return which reflected an adjusted gross income ("AGI") of $74, 714.42, a taxable income of $44, 968.00, and withholding credits of $9, 803.76. Id. The Greenes reported a tax liability of $8, 450.00 in the 1040 return, and received a refund of $934.00. (Doc. 13-1 at 3). Mr. Greene also filed a corporate return for the 1990 taxes of his 100% personally-owned corporation, MDG Inc. (Doc. 1 at 2).
In 1992, the Internal Revenue Service ("IRS") opened an examination of the Greenes' 1990 tax returns. (Doc. 1 at 2). The IRS completed its examination of the 1990 tax returns in 1997. Id. After the examination, IRS account records reflected the Greenes' 1990 AGI as -$493, 879.58 with a taxable income of $0.00. Id. The 1990 IRS examination work-papers also alleged unreported income of $888, 496.75 to MDG Inc. Id. at 3. The IRS issued a Statutory Notice of Deficiency reflecting a deficiency of $269, 830.00, a fraud penalty of $191, 939.00, and an accuracy penalty of $2, 782.00. (Doc. 13-1 at 4). The IRS determined that Mrs. Greene was not liable for the entire tax liability resulting from the 1990 Notice of Deficiency. (Doc. 13-1 at 4). Thus, the IRS assessed taxes on two separate accounts: one Joint Master File account, and one separate Non-Master File account ("NMF 1") for Mr. Greene individually. Id. at 4-5. An amount of approximately $202, 000.00 was assessed to the Joint Master File account of Mr. and Mrs. Greene. Id. at 5. The remaining portion of the deficiency, approximately $350, 000.00, was assessed to the separate NMF 1 account under Mr. Greene's name only. Id. After the IRS applied the assessment to the Joint Master File account, the IRS granted Mrs. Greene innocent spouse relief from the joint and several liability. Id. The full liability of the Joint Master File was then transferred to a second separate Non-Master File account ("NMF 2") against Mr. Greene only. Id. Thus, the liability shown on the Joint Master File account was reduced to $0.00. Id. After Mrs. Greene received innocent spouse relief, "Mr. Greene's liability was tracked in the two separate assessment files, NMF 1 and NMF 2." Id.
In 2012, the United States and Mr. Greene settled a refund suit for Mr. Greene's 1995 tax year. (Doc. 13-1 at 6). "The liability tracked in NMF 2 was paid in full" when $170, 124.00 of the settlement amount was offset against Mr. Greene's 1990 tax liability. (Doc. 17 at 5). Meanwhile, NMF 1 has an outstanding balance of $761, 101.46 with more interest accruing daily. (Doc. 13-1 at 6).
Mr. Greene filed the instant suit seeking a refund for the $170, 124.00 offset against NMF 2. (Doc. 1 at 5).
B. Legal Standard
1. Rule 12(b)(1)
Rule 12(b)(1) "allows litigants to seek the dismissal of an action from federal court for lack of subject matter jurisdiction." Tosco Corp. v. Cmtys. for a Better Env't, 236 F.3d 495, 499 (9th Cir. 2001) abrogated by Hertz Corp. v. Friend, 559 U.S. 77 (2010). "The party asserting jurisdiction has the burden of proving all jurisdictional facts." Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936)).
An allegation of lack of subject matter jurisdiction may be raised at any time by the parties or the court. Fed.R.Civ.P. 12(h)(3). A Rule 12(b)(1) motion to dismiss "for lack of subject matter jurisdiction may either attack the allegations of the complaint or may be made as a speaking motion' attacking the existence of subject matter jurisdiction in fact." Thornhill Publ'g Co. v. Gen. Tel. & Elecs., 594 F.2d 730, 733 (9th Cir. 1979). In resolving a "speaking motion" or "factual attack" under Rule 12(b)(1), the court is not limited to the allegations in the pleadings if the jurisdictional issue is separable from the merits of the case. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). Instead, the court may view evidence outside the record, and no presumptive truthfulness is due to the complaint's allegations that bear on the subject matter jurisdiction of the court. Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). Indeed, "the district court is ordinarily free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, ...